May 04, 2011
BP to Pay $85 Million for Oil Spills in Alaska
by Robert Kropp

The company agrees to pay $25 million in civil penalties and $60 million for pipeline improvements
after "gross negligence" led to spills of more than 5,000 barrels of oil on Alaska's North Slope in
2006.

In March 2006, a pipeline owned and operated by BP Exploration Alaska spilled more that 5,000
barrels of crude oil on the North Slope in Alaska. In August of that year, another 24 barrels of
oil spilled. The Department of Transportation's Pipeline and Hazardous Materials Safety
Administration (PHMSA) issued a Corrective Action Order to BP following the 2006 spills, ordering
the company to repair or replace pipeline. BP failed to comply with the terms of the Order, which
led to criminal charges against the company.

In 2007, BP Alaska pled guilty to one
misdemeanor violation of the Clean Water Act for the spills. The company was sentenced to three
years probation and ordered to pay a $20 million criminal penalty.

In addition, BP Alaska
replaced 16 miles of its oil pipelines, at an estimated cost of $200 million, "with increased
capacity for pipeline inspection and maintenance," according to the US Environmental Protection
Agency (EPA).

Yesterday, EPA and PHMSA announced a settlement of civil charges against BP for the Alaskan
oil spill. According to the press release, BP "will pay $25 million in civil penalties and
implement a system-wide pipeline integrity management program," at an estimated cost of an
additional $60 million.

"Today's settlement with BP Alaska imposes a tough penalty and
requires the company to take action to prevent future pipeline oil spills on the Alaska North
Slope," stated Cynthia Giles of EPA. "The Clean Water Act gives the US authority to assess higher
penalties when oil spills are the result of gross negligence, and this case sends a message that we
intend to use that authority and to insist that BP Alaska and other companies act responsibly to
prevent pipeline oil spills."

EPA's press release specifically stated, "The penalty is the
largest per-barrel penalty to date for an oil spill." However, a spokesperson for BP Alaska argued
that the penalty was not a per-barrel assessment. The spokesperson also stated, "We believe the
terms of the agreement are fair."

If it is determined that BP was grossly negligent in
last year's Gulf of Mexico oil spill, when an estimated 5 million barrels of crude oil flowed into
the Gulf before the well was sealed, the company could be liable for penalties exceeding $20
billion.